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Business/Finacial Desk; Section = C
ENRON'S MANY STRANDS: THE POLITICS
Enron, Preaching=20 Deregulation, Worked the Statehouse Circuit
By LESLIE=20 WAYNE

02/09/2002
The New York Times
Page 1, Column 2
c. = 2002 New=20 York Times Company

WASHINGTON, Feb. 8 -- When it = came to=20 lobbying, the Enron Corporation, and Kenneth L. Lay, its former = chairman, were=20 about as persistent as anyone had ever seen in California -- or Texas,=20 Tennessee, Oregon and Pennsylvania.=20

With lavish campaign = contributions, a fleet=20 of lobbyists, personal pitches by top Enron executives and even a phone = call=20 from George W. Bush, then governor of Texas, to Tom Ridge, then governor = of=20 Pennsylvania, Enron was the biggest player in the state legislatures in = the late=20 1990's, pushing its version of energy deregulation.

Recent attention in the Enron = scandal has=20 focused on the company's efforts to influence Congress and the White = House. But=20 Enron had been conducting a similar campaign on the state level, with = far less=20 visibility and with considerable success.=20

The objective was to break up = monopoly=20 control of energy markets by local utilities and change the rules so = energy=20 would be deregulated. To a large extent that goal was reached -- from = 1997 to=20 2000, 24 states adopted some form of energy deregulation, allowing = energy=20 companies like Enron to find new markets.=20

''Enron was the only company = out there=20 lobbying and they were everywhere,'' said Paul Joskow, director of the=20 Massachusetts Institute of Technology Center for Energy and = Environmental Policy=20 Research. ''They not only carried a lot of water for themselves. But = they=20 carried water for the rest of the industry.''=20

So determined was Enron that it = frequently=20 dispatched top executives like Mr. Lay and Jeffrey K. Skilling, its = former chief=20 executive, to meet with utilities commissioners, testify before = statehouse=20 committees and call on local politicians.=20

This lobbying was backed by = hefty campaign=20 contributions, $1.9 million to more than 700 candidates in 28 states = since 1997,=20 according to the National Institute on Money in State Politics, a = nonprofit=20 group.=20

In the 2000 election cycle = alone, Enron=20 gave $1.1 million to local candidates: as little as $250 to $500 in = hundreds of=20 districts, as much as $10,000 to influential state legislators in = California and=20 other big states.=20

Unlike utilities or consumer = groups that=20 lobbied for deregulation in one state or a few, Enron took on the issue=20 nationally. Its unique strategy combined a promise of lower electrical = costs by=20 ending utility monopolies with old-fashioned statehouse power politics.=20

''In 4 years, energy = deregulation passed in=20 24 states,'' said Ed Bender, executive director of the National = Institute on=20 Money in State Politics. ''That's amazing. I don't think you can call it = a=20 coincidence. They were trying to make something happen.''=20

In the mid to late 1990's, = contributions=20 streamed to elected officials -- Gov. Gray Davis of California, for = instance,=20 received $97,500 of Enron's $438,155 in contributions to California = politicians.=20 Gov. Rick Perry of Texas, then lieutenant governor, received $212,000; = Gov.=20 George E. Pataki of New York got $9,000.=20

As seven Midwestern states = considered a=20 deregulation plan, Enron gave money to state house candidates in four of = those=20 states, including $21,350 to legislators in Michigan and $19,805 to = legislators=20 in Iowa.=20

''They were smart -- they went = after people=20 who they knew would make a difference,'' said Mary Kenkel, former = manager for=20 federal affairs at the Edison Electrical Institute, a utility lobbying = group.=20

Enron officials said that the = company was=20 proud of the role it played in energy deregulation, though in the = aftermath of=20 its bankruptcy filing and the sudden end of the California energy = crisis, it is=20 now doing very little business in the states it once lobbied. Some = states where=20 Enron does business are questioning whether to suspend Enron contracts.=20

''It's no secret we were very = active,''=20 said Mark Palmer, an Enron spokesman. ''We helped open markets that = needed to be=20 opened. And there continue to be markets that need to be opened.''=20

When Pennsylvania was = considering a=20 deregulation bill in 1997, Mr. Lay prevailed on Governor Bush to call = Governor=20 Ridge to vouch for Enron. ''I said it would be very helpful to Enron,'' = Mr. Lay=20 said last year.=20

Pennsylvania wound up enacting=20 deregulation, in a plan that included some elements Enron favored and = some it=20 did not.=20

In a number of state capitals, = Enron took=20 on some powerful interests, including local electrical monopolies, which = are=20 often the biggest campaign donors on the state level. Enron = representatives=20 often came in cold, without any contacts in government or the lobbying=20 community. To compensate, they lined up experts to testify, hired local=20 lobbyists and joined with consumer groups and some local utilities to = present a=20 united front for deregulation.=20

''They were basically strangers = in these=20 state capitals,'' said John Hanger, president of Citizens for = Pennsylvania's=20 Future, an environmental group. ''They spent money to buy friends = quickly and=20 present their case quickly because they were up against utilities that = had=20 decades of local political relationships.''=20

Lobbying the Pennsylvania = legislature was=20 also the stated reason that Karl Rove, Mr. Bush's political adviser, = recommended=20 that Enron give Ralph Reed, a Republican strategist with ties to = religious=20 conservatives, a consulting contract, which it did. Mr. Reed never had = to lobby=20 in Pennsylvania -- his hiring came after a deregulation bill was passed. =

In California, Enron spent more = than=20 $345,000 on lobbying, hiring former legislators and former utilities = commission=20 officials. As early as 1994, Mr. Skilling, the former Enron chief = executive who=20 then headed an Enron energy subsidiary, testified to utility = commissioners that=20 deregulation could save the state $8.9 billion.=20

''You can triple the number of = police=20 officers in Los Angeles, San Francisco, Oakland and San Diego,'' he = said. ''The=20 stakes are huge and every minute that we delay bringing competitive = markets to=20 California allows the meter to keep ticking.''=20

Texas' deregulation plan -- the = culmination=20 of a legislative battle that began in 1995 -- went into effect last = month. While=20 Enron did not get all it wanted, it scored a partial victory. Texans for = Public=20 Justice, a watchdog group, estimates that Enron's statehouse lobbying = cost=20 $535,000 to $945,000.=20

Enron hired 83 lobbyists in = Texas, bought=20 advertisements in local papers and gave to local charities, including = Laura=20 Bush's book fair.=20

''Enron was unique because of = the=20 sophistication of their play,'' said Tom Smith, Texas director of Public = Citizen, a consumer group. ''It was all Enron, all the time. They helped = craft=20 the legislation. They gave to high-profile charities. They gave to both = sides of=20 the aisle. They'd hold fund-raisers for those they wanted to re-elect. = And they=20 had the good ol' boy lobbyists go out after hours boozing and = schmoozing.''=20

In New York, where deregulation = was enacted=20 in 1996 but revisited for years, Enron made contributions to the state=20 Republican party in addition to Mr. Pataki and hired a former state = energy=20 official, Howard Fromer, to lobby for it.=20

Just last year, Mr. Lay called = Governor Jeb=20 Bush of Florida to pitch deregulation there. Florida ultimately did not = pass=20 energy deregulation, but lawmakers debated it for two legislative = sessions.=20

Elsewhere, Enron's = aggressiveness=20 backfired. Its style did not play well in Oregon, where Enron bought = Portland=20 General Electric, a utility it is now trying to sell, and where partial=20 deregulation was enacted in 1999.=20

''They came in like a house of = fire and we=20 cooled their jets,'' said Fred Heutte, energy coordinator for the Oregon = Sierra=20 Club. ''Once they realized they wouldn't be allowed to do what they = wanted, they=20 lost interest. They came in with a blatant attempt to roll the = legislature and=20 impress everyone with how important they were compared to podunk Oregon. = We=20 didn't like it.''=20

The legacy of Enron's efforts = is that=20 consumer electrical markets have been made more competitive -- even = though the=20 company has backed off from conducting business in many of those = markets.=20

''For all of Enron's problems, = they played=20 an important role in opening up markets that were among the most = fossilized in=20 the country,'' said Robert Michaels, an economics = professor at the=20 University of California at Fullerton. ''Whatever Enron did = wrong, it=20 spent a lot of money to achieve this.''

Photos: In relentlessly pressing for energy deregulation state by = state,=20 Enron made its logo, top, familiar to state legislators across the = country. The=20 company was a big contributor to the campaigns of Gov. Rick Perry of = Texas,=20 left, and Gov. Gray Davis of California. (Associated Press); (Associated = Press)(pg. C1) Chart: ''Enron's Statehouse Donations Enron and Kenneth = L. Lay,=20 its former chairman, gave $1.9 million to hundreds of state politicians = in the=20 1998 and 2000 election cycles, as many legislatures considered energy=20 deregulation bills. For the 2000 elections, 98 percent of the giving = went to=20 candidates who won. STATE: Texas TOTAL DONATIONS FOR '00 AND '98 = ELECTION=20 CAMPAIGNS: $548,526 2000 CANDIDATES: 81 1998 CANDIDATES: 70 STATE: = California=20 TOTAL DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 438,155 2000 = CANDIDATES: 83=20 1998 CANDIDATES: 67 STATE: Oregon TOTAL DONATIONS FOR '00 AND '98 = ELECTION=20 CAMPAIGNS: 149,549 2000 CANDIDATES: 87 1998 CANDIDATES: 87 STATE: = Florida TOTAL=20 DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 142,750 2000 CANDIDATES: = 102 1998=20 CANDIDATES: 85 STATE: Ohio TOTAL DONATIONS FOR '00 AND '98 ELECTION = CAMPAIGNS:=20 53,675 2000 CANDIDATES: 79 1998 CANDIDATES: 39 STATE: Nevada TOTAL = DONATIONS FOR=20 '00 AND '98 ELECTION CAMPAIGNS: 48,750 2000 CANDIDATES: 32 1998 = CANDIDATES: 22=20 STATE: New Jersey ('99 and '97 elections) TOTAL DONATIONS FOR '00 AND = '98=20 ELECTION CAMPAIGNS: 26,200 2000 CANDIDATES: 21 1998 CANDIDATES: 3 STATE: = Michigan TOTAL DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 25,700 2000 = CANDIDATES: 28 1998 CANDIDATES: 50 STATE: Indiana TOTAL DONATIONS FOR = '00 AND=20 '98 ELECTION CAMPAIGNS: 15,820 2000 CANDIDATES: 22 1998 CANDIDATES: 5 = STATE:=20 Iowa TOTAL DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 14,610 2000 = CANDIDATES:=20 32 1998 CANDIDATES: 41 STATE: Missouri TOTAL DONATIONS FOR '00 AND '98 = ELECTION=20 CAMPAIGNS: 13,828 2000 CANDIDATES: 23 1998 CANDIDATES: 5 STATE: Maryland = TOTAL=20 DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 12,250 2000 CANDIDATES: 0 = 1998=20 CANDIDATES: 13 STATE: Pennsylvania TOTAL DONATIONS FOR '00 AND '98 = ELECTION=20 CAMPAIGNS: 12,150 2000 CANDIDATES: 9 1998 CANDIDATES: 2 STATE: Illinois = TOTAL=20 DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 10,500 2000 CANDIDATES: 8 = 1998=20 CANDIDATES: 8 STATE: Louisiana ('99 elections) TOTAL DONATIONS FOR '00 = AND '98=20 ELECTION CAMPAIGNS: 8,625 2000 CANDIDATES: 26 1998 CANDIDATES: n.a. = STATE: New=20 York TOTAL DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 7,850 2000 = CANDIDATES:=20 4 1998 CANDIDATES: 2 STATE: Oklahoma TOTAL DONATIONS FOR '00 AND '98 = ELECTION=20 CAMPAIGNS: 5,250 2000 CANDIDATES: 15 1998 CANDIDATES: 1 STATE: = Connecticut TOTAL=20 DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 4,500 2000 CANDIDATES: 0 = 1998=20 CANDIDATES: 16 STATE: Kansas TOTAL DONATIONS FOR '00 AND '98 ELECTION = CAMPAIGNS:=20 4,300 2000 CANDIDATES: 8 1998 CANDIDATES: 18 STATE: Colorado TOTAL = DONATIONS FOR=20 '00 AND '98 ELECTION CAMPAIGNS: 3,000 2000 CANDIDATES: 1 1998 = CANDIDATES: 1=20 STATE: New Mexico TOTAL DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: = 2,500 2000=20 CANDIDATES: 1 1998 CANDIDATES: 2 STATE: South Dakota TOTAL DONATIONS FOR = '00 AND=20 '98 ELECTION CAMPAIGNS: 1,500 2000 CANDIDATES: 10 1998 CANDIDATES: n.a. = STATE:=20 Nebraska TOTAL DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 1,042 2000=20 CANDIDATES: 3 1998 CANDIDATES: n.a. STATE: Kentucky ('99 elections) = TOTAL=20 DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 1,000 2000 CANDIDATES: 1 = 1998=20 CANDIDATES: 0 STATE: West Virginia TOTAL DONATIONS FOR '00 AND '98 = ELECTION=20 CAMPAIGNS: 1,000 2000 CANDIDATES: 1 1998 CANDIDATES: 0 STATE: North = Carolina=20 TOTAL DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 1,000 2000 = CANDIDATES: 0=20 1998 CANDIDATES: 2 STATE: Arizona TOTAL DONATIONS FOR '00 AND '98 = ELECTION=20 CAMPAIGNS: 760 2000 CANDIDATES: 1 1998 CANDIDATES: 0 STATE: Maine TOTAL=20 DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 700 2000 CANDIDATES: 7 = 1998=20 CANDIDATES: 0 STATE: Washington TOTAL DONATIONS FOR '00 AND '98 ELECTION = CAMPAIGNS: 600 2000 CANDIDATES: 1 1998 CANDIDATES: 2 STATE: Arkansas = TOTAL=20 DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 500 2000 CANDIDATES: 1 = 1998=20 CANDIDATES: n.a. STATE: Georgia TOTAL DONATIONS FOR '00 AND '98 ELECTION = CAMPAIGNS: 500 2000 CANDIDATES: 2 1998 CANDIDATES: 0 STATE: Wyoming = TOTAL=20 DONATIONS FOR '00 AND '98 ELECTION CAMPAIGNS: 500 2000 CANDIDATES: 0 = 1998=20 CANDIDATES: 1 Chart tracks status of state electric deregulation = including=20 completely deregulated, deregulation suspended or delayed, partially=20 deregulated, and still regulated. (Sources: National Institute on Money = in State=20 Politics; Edison Electric Institute)(pg. C5)